Restructured BAE targets expansion

May 31, 2011

A year ago, BAE Systems Inc. embarked on a major organizational restructuring designed to cut costs, streamline management and improve its ability to meet customer needs — and to respond to the exigencies of a changing government market.

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“It was a year-long process that has made us much more agile,” said D. Michael Bennett, BAE’s senior vice president of information management and CIO.

The big Defense contractor previously was divided into two operating groups, Electronics, Intelligence and Support and Land and Armaments, each with its own management structure and subordinate business units. Under the restructuring, the company now comprises five sectors--Land and Armaments, its largest sector; Electronic Solutions; Platform Solutions; Support Solutions; and Intelligence and Security—each managed by a sector president who reports to one of two executive vice presidents. The two EVPs report directly to BAE president and chief executive officer Linda Hudson."

“We went from a large group structure with a fairly large and expensive management layer to eliminating that management layer and going to a sector structure that eliminates costs from a management perspective, focuses the businesses much more on the customers and gives us more flexibility,” Bennett said.

The company’s new structure also has improved internal synergy and communications flow across the five sectors, providing another benefit for customers. “We’re constantly looking for new ways in which we can leverage existing technologies or capabilities to do what we do better, faster and cheaper,” Bennett said. “We’ve structured ourselves to connect the various parts of the business in a way that we can quickly take advantage of solutions that we’ve developed in one part of the business and transfer them to other parts of the business.”

Bennett declined to say how much BAE expects to save in costs from the restructuring. “What I would say is it was a lot, and it has kept us competitive and made us even more competitive,” he said.

In the past year, BAE has chalked up some key contract wins, including:

A five-year, $1 billion contract from the National Geospatial-Intelligence Agency for its Total Application Services for Enterprise Requirements program under which BAE will compete for task orders.

Two Defense Intelligence Agency awards: $350 million total for the Solutions for the Information Technology Enterprise and Next Generation Desktop Environment programs.

A $72 million contract for the Navy’s Distributed Common Ground System, which will deliver intelligence technologies to Navy ships.

BAE also in the past year bolstered its electronics and intelligence and security portfolios with three key acquisitions: Fairchild Imaging Inc., OASYS Technology and L-1’s Intelligence Services Group.

Against a climate of ruthless government budget cutting — Defense Secretary Robert Gates wants to make $100 billion in military spending cuts during the next five years — the company has made sure it was ready for anything. “We assumed there would be [budget] issues so we prepared ourselves for that,” Bennett said. “We know the budget is going down in some areas, so we’ve shifted our focus into those areas where we think the budget is growing and the customers need us.”

One of the areas where BAE expects significant market growth is cybersecurity. The company has invested heavily in its own internal information security, creating a kind of ready-made test environment for technologies that can serve its customers too, Bennett said.

“Obviously, we have a lot of government information on our networks,” he said. “We’re using cutting-edge technology and solutions internally, and in turn…we’re using our internal capability to support the external business so that we’re not only able to bring solutions to the market space in the cyber area that are current but also solutions that we know work because we’re using them internally. And we know how to scale solutions in a much more cost-effective way going forward.”

“We’re also able to give the government the assurance they’d like to have that the information we have in our possession that is classified is as secure as possible,” he added.

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